Case study question
A. What was W L Gore’s international strategy and mode of entry into their selected global markets
Firms who sell their products or services outside their domestic market will use one of three international strategies, global, multidomestic and transnational. WL Gore has offices in more than 25 countries with manufacturing facilities located in Japan, China, Germany, United Kingdom and the United States (“gore story,” n.d.). They use a transnational strategy which means that they seek to achieve both global efficiency and local responsiveness (Hitt, Ireland, & Hoskisson, 2016). This strategy gives the decision making powers to the regional departments and they are not handed down from the corporate office. However the brand development and finances remain within the corporate office in Newark, Delaware.
The mode of entry into an international market can vary but include exporting, licensing, strategic alliances, acquisitions and new wholly owned subsidiaries. Gore has used all of the modes of entry to grow their business. Some examples are Gore using licensing for some of their products which means they have given their permission to another to sell their goods. Franchising which gives the franchisee a license that allows them to access the main company’s products or knowledge. Gore has used franchising as a mode of entry with the example of Electro Enterprises who they made a franchise in 2015 for Gore Microsave/RF Assemblies in the military and aerospace markets (New Desk, 2015). An example of Gore using strategic alliance is when they partnered with Pall to give them exclusive worldwide rights to GORE-TEX filter technology (Businesswire.com, 2003).
B: (RJ): Analyze the effectiveness of this international strategy(ies). ?
C. What are the advantages and disadvantages relating to the strategy they employed?
Advantages and Disadvantages of Gore’s International Strategies
As previously mentioned, Gore utilized a multi-faceted approach with their international strategy. Licensing, franchising, and utilizing strategic alliances are a few of the tactics used by Gore in an attempt to gain a competitive advantage on the global market. Each of these strategies has unique advantages and disadvantages, which made it reasonable for a company such as Gore to employ different strategies for each new international market it sought to enter.
Licensing is when the company in question, Gore, provided a licensee company the rights to produce Gore’s materials in the licensee’s home country and distribute the goods in their own existing markets. Gore, of course, would receive royalties from these sales as the licensor, which is one benefit of licensing, however, that’s not where the benefits end. Expanding existing products into new markets where licensees operate can help increase returns, helping to cover costs faster than if products were only able to be sold domestically (Hitt, Ireland, & Hoskisson, 2017). This reduces risks considerably and adds very little in the way of additional costs. One major disadvantage of licensing is the lack of control that the licensor has in the distribution and sales of products by the licensee. While this can be mitigated by having iron-clad licensing agreements between both parties, it does not eliminate all of the risk (Hitt, Ireland, & Hoskisson, 2017). Once the licensing agreement ends, there is nothing stopping the licensee from using knowledge gained from the technology and science behind what they were previously doing for the licensor and creating their own products, eliminating the licensor from the equation altogether.
Franchising, alternatively, allows for an attractive alternative to acquisitions or mergers. The franchisee incurs an initial cost in the way of the franchise fee and ongoing royalties to the franchisor, which is one of the main benefits for a company to consider franchising. This also allows for a company to dominate a market through the consolidation of independent companies that are part of the franchise agreement (Hitt, Ireland, & Hoskisson, 2017). There are a few downfalls to franchising, of course. The first of which is simply the lack of control that the franchisor has over franchised operations. The franchisee has control over day-to-day operations, which reduces control of the franchisor. Another disadvantage is that the franchisor does not get the same kind of revenue stream from a franchised operation as it would a company-owned operation. With a company owned operation, the company gets 100% of all revenue, but it also owns 100% of the risk (Siebert, 2015).
Finally, strategic alliances offer unique advantages in international strategies. Entering into this kind of relationship allows partnering firms to create a level of value unattainable through solo-ventures. Additionally, partnering with other firms can assist a company in reaching lofty performance objectives that may not be possible due to constrained resources (Hitt, Ireland, & Hoskisson, 2017). Alliances of this nature do offer disadvantages as well. As with franchising, strategic alliances can result in a loss of control to an extent, however, the loss of control is less about physical control of operations and more about perception of the company from the outside due to the merging of reputations between firms. Additionally, without a fully-vetted contract between firms, the equality of benefits between firms can be a source of uncertainty and stress. Finally, the risk of liability can be a disadvantage to firms in a strategic alliance. If one firm in the alliance runs into legal issues, there is risk that other partners may be held liable as well (McQuerrey, 2020).